'Final pensionable pay' used to calculate early and deferred Premium pension (Civil Service)

Frost8562

Hi, I'm about to take a voluntary exit package and had intended to take my Premium pension early and use the bulk of the compensation payment to buy-out the actuarial reduction. However, yesterday I got a drastically revised pension estimate that’s much lower. They seem to be saying that they’d belated spotted that because I’d be leaving the Civil Service and claiming this pension just before age 55 the ‘final pensionable earnings’ used in the calculation will be much lower than my actual earnings. It’s based on the average of 3 consecutive years ending 2018 and not uplifted to account for inflation since then, with them saying I’m not entitled to the inflation uplift as I’m under 55. That results in the final pensionable earnings being much lower than my actual current earnings. Reading other posts on this forum I get the impression this is what the rules say, albeit a bit of a perverse outcome. Is this right?

That then made me plan to not claim my pension upon exit, but preserve it and claim when I reach normal pension age for the Premium scheme at 60. But – will I get caught by the same issue because I’m leaving the Civil Service before age 55? Essentially it’s a question of does the rule meaning my final pensionable earnings are calculated on my salary in those past years not uplifted for inflation still stand because I’m leaving the civil service before age 55, or is that rule just about not being below age 55 when I claim the pension, so if I claim at 60 that rule won’t apply and they’ll redo the calculation entirely? I appreciate any deferred pension will (probably) be increased to cover inflation between ages 55 and 60, but if that increase is applied to their current pension quote based on final pensionable earnings that are so much lower than my actual salary, then I’ll get a much lower pension. Thanks

hugheskevi

To identify your best pensionable earnings, inflation-adjusted past salary is used. To calculate the pension payable before age 55, those same years of earnings are used but without inflation adjustment, ie, the cash figures are used as final pensionable earnings.

Once you reach age 55 the calculation is redone based on the same best years and using inflation-adjusted past salary. The pension is increased from that point forward (no arrears payable for under 55 period). 

If you start to receive your pension at 55 or older, inflation-adjusted past salary is used to calculate the pension payable.

When you exit makes no difference, it is all about when you commence the pension.

Frost8562

Great, that's really helpful. Thank you!